Regardless of how big or small of a business you have, making the customers come back to purchase the product, again and again, is crucial to the business. The more they do, the higher the customer lifetime value and in turn can guarantee an increase in the revenue, which you wouldn’t want to miss. So you should try and work to increase customer lifetime value.
So here on, think about that as an important metric, or if it’s already on the monitoring mode, know the seven ways to increase it correctly!
Well on a quick note, what is Customer Lifetime Value?
Customer Lifetime Value is the overall spending by the customer with your business over a stretch of time.
It’s simple to calculate and all you need is;
- The value of the average cost of their spending. – Avg purchase value.
- The average of the times of purchase in a year – Avg purchase frequency.
- The average of the years of relationship with the customers – Avg time in years.
Multiply all of them with one another, you’ll have the Customer Lifetime Value (CLV).
|CLV -= Average purchase value * Average purchase frequency * Average time in years.|
Let’s take an example of a customer who has bought the subscription of a basic plan worth $70/ month and is taking up to 1 year. So, the average purchase frequency is 12 times.
The customer lifetime value = $70 * 12 = $840/year.
If they spend up to 3 years which is the usual churn time.
Then the avg CLV = $70 * 12 * 3 = $2,520
But the point is how to increase it, whether it’s low-value customers or high-value customers?
7 ways to increase customer lifetime value (CLV)
Set Up a Smooth Onboarding Process
It all starts from this point “Onboarding”. It’s about keeping customers happier and doing what it takes to make them happier! This step takes a little push to impress customers and not give them a hard feeling.
Remember they expect quicker resolutions and you’d want to be keeping it. So, try to keep it as quick and slicker as possible.
Most importantly all of us are different and can’t host upon one way or the method. Get going with the trial and error method to know what works well with each customer.
Foster Customer Training Program
To get customers to like your product, it’s important to engage the customers with training. That is how to use your product to get the outcomes they expect. The penny they invest in learning gets them to spend more on the product it gives them that output. In fact, you are on top of their head, while they are engaged in personal development. This has a huge impact on their decision.
Give Out Free Upgrades
Haven’t you seen the competitors giving away free stuff to people? It indeed works for them and why not you? But hold that thought! Let’s revise the concept of giving something. Let’s say you have developed something new and want to receive feedback in return, then giveaway upgrades for free but in return for feedback for improvisation! Their feedback is indeed so valuable and that’s what keeps us running in the market of competition. But you are getting it either at little of a cost and ensuring them that their insights are of utmost value.
Light Up The Pricing
It’s not that you wake up one day and realize it’s time to increase your product’s pricing and you just do. Nope! You’ve got a much bigger challenge as to not push them to the edge.
The idea is simple! When you began to look for a product, you were new to its pricing but of course, compared it with the competitors to see if it was worth it to make a decision. Introduce the new products or services to the existing customers by up-selling or cross-selling and the price you set is the price they know and have nothing to compare it to.
While on the same logic it makes room for introducing new customers with the new pricing of the old product. Thus new customers are increasing CLV in the long run and as well a shot on the short run too.
Amplify Annual Billing
The good part of the SaaS model is its flexibility in opting for service at any point in time with monthly billing.
But at the same point, to increase the customer lifetime value, annual billing can add a lot of weightage to guarantee it. The way to do it is to have made them understand the value in the early stage. So that they trust the product for annual billing with a 10% discount or 20% sometimes. The annual billing idea gives time to breathe to plan the cross-selling and upselling.
Apply Expansion Revenue Tactics
Ultimately after realizing the value of your product at basic plans, it’s time for them to take more expensive plans. That’s the goal of every business.
The value you create in the earlier plans is what drives them there and hence the upsells and cross-sells should be tactically handled. It all lies in understanding how engaged they are with the earlier plans and what ROI they’ve made using it.
Which just makes the upsells executed at the right moment and makes the way for complements i.e. cross-sells a place to tweak in.
Here is an Upsell opportunity template that might come in handy for you.
Collect Customer Feedback
Along with selling it to people, it is also crucial to know how satisfied are your customers with the product or service they’ve been offered. That indeed is an indirect way to measure if your customers like to hold on to your product for a longer time or not.
To know this you can roll out NPS and customer satisfaction surveys and you can use tools to automate this process.
NPS can clear you with how likely your product will be referred to another co-worker and tell you how satisfied they are with the brand. Whereas the customer satisfaction survey indulges in finding answers for different aspects of the product or the business, giving insights specifically on the areas that need improvement.
Final thoughts to increase customer lifetime value
Increasing customer lifetime value isn’t a short-term plan though, as it’s an ongoing process. The value of the product is defined based on the value delivered to your customers. So, customers can’t be taken lightly in improving the customer lifetime value. Before implying the tactic, see if it is lucrative for the processes set at your firm.